Tuesday Morning Dairy Market Update - Follow-Through Strength Expected

OPENING CALLS:

Class III Milk Futures:	5 to 10 Higher
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	3 to 4 Lower
Soybean Meal Futures:	$0.50 to $1 Lower
Wheat Futures:	1 to 2 Lower

MILK:

Milk futures received a boost Monday due to the strength of the underlying cash market. Futures increased significantly as they adjust to remain in line with the strength. It is unlikely the strength will be maintained as the milk supply is higher than a year ago and supplies are sufficient. Hopefully, some of the gains will be maintained and will provide some support for better prices than futures had indicated recently. USDA will release the July Agricultural Prices report Tuesday afternoon. The report will provide most of the prices used to calculate income over feed for the Dairy Margin Coverage program. The soybean meal price will not be released until Wednesday unless the FSA releases it early due to the potential for a government shutdown at midnight. It is uncertain whether a shutdown would impact the release of the price. Tuesday is the last day to trade September futures and options with the Federal Order class prices released on Wednesday.

CHEESE:

Cheese prices may have found support, but the upside price potential may be limited. Cheese production is steady and slowly increasing as milk receipts are increasing at the plant level. Demand has been steady, but may improve over the next few months. The increase in American cheese stocks in August is a little concerning, as inventory usually declines.

BUTTER:

Trading in butter has increased over the past few weeks. Manufacturers have been increasing output due to more cream being available. They have been moving supplies to the spot market to limit inventory at the plant level. Buyers have been willing to purchase what is being offered and pay more for it as they take advantage of the low price. This will limit their aggressiveness as holiday demand nears, as they will already have sufficient supplies on hand.